((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
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Cognac sales far exceed expectations, thanks to China
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Remy CFO warns acceleration may not continue
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American recovery postponed until next year
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Stocks lose gains
(Rewritten paragraph 1 on share price performance; added CFO comments to paragraphs 1, 6-7 and 15, and investor comment to paragraphs 12-13) by Emma Rumney
The shares of Remy Cointreau
RCOP.PA lost gains on Friday as its chief financial officer Luca Marotta warned that a surprise rise in China-fueled growth at its cognac division may not last due to uncertainty in the second-largest economy worldwide.
Shares of cognac maker Remy Martin initially rose 6.8% after reporting a much smaller-than-expected drop in fourth-quarter sales, but were flat at 0950 GMT.
Analysts had forecast a 3.4% drop in the group’s organic sales and stable cognac sales. Instead, cognac sales increased by 15.4%, bringing the group-level decline to just 0.7%.
Remy attributed the rise to its performance in China, one of its two largest markets, where marketing initiatives helped boost sales during the Lunar New Year festivities in February.
The huge annual celebration tends to boost alcohol consumption, but Remy’s rival Pernod Ricard
PERP.PA, described this year as “soft” on Thursday.
Mr. Marotta said uncertainty remained in China and Remy could not guarantee that sales acceleration would continue.
“We think we are doing more than well and…better than our peers, but we remain humble,” he said, warning that Remy was not optimistic about China’s future.
Investors in several sectors, from drinks to luxury goods, are worried about Chinese demand as the world’s second-largest economy loses steam.
Laurence Whyatt, an analyst at Barclays, said most consumer companies were optimistic.
Since Remy’s sales growth is partly based on increased sales to wholesalers and retailers, it remains to be seen whether the company can buck the trend, he continued.
Cognac companies like Remy also face the threat of looming tariffs on their products.
Oliver Adcock, European portfolio manager at Remy investor NS Partners, said Remy’s success showed, however, that the situation in China was not entirely negative.
“It’s a good example that there is still a fantastic consumer story in China,” he said.
Meanwhile, Remy’s problems in the United States, where wholesalers and retailers have reduced stocks of expensive alcoholic beverages, have continued.
Mr. Marotta said the best-case scenario for a U.S. recovery now lies in the second half of its next fiscal year.
Remy will publish its annual results on June 6.